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Adam Smith turns green

Sunil PaulFebruary 6, 2007 10:10 AM

(Editor’s note: Sunil Paul is a former tech entrepreneur who several years ago turned his attention to green technologies, before it became a fad. We asked him to write a column for VentureBeat. See his LinkedIn profile for more about Sunil.)

We investors and entrepreneurs in the cleantech world have a guilty conscience. People often ask us, “Are you motivated by the money or by the mission?” It’s become unfashionable and a little shameful to say you’re driven by anything but profit, but I’m not afraid to say I’m a clean energy investor because of my values.

The money vs. mission question comes from fear. Environmentalists and energy security hawks fear capitalists will sell out their social goals in favor of profit. Investors fear a venture investor or entrepreneur will subvert their financial return for a social agenda.

Venture capitalists are beholden to their limited partners who are weighing whether to put money into venture capital versus, say, currency arbitrage. Those investors don’t want to hear that the venture capitalist has any motivation other than giving them a great return. That mentality rubs off on venture capitalists, and trickles down to entrepreneurs and management teams.

But it doesn’t have to be a choice between social and economic goals. Clean energy is like the love child of John Muir and Adam Smith. It joins environmentalism with capitalism. Cleantech companies have great value not captured by the price of the good or service. Their entire business model generates excess social return. In addition, the energy market is huge, and is ripe for change • and so the opportunity for profits is tremendous.

For me, the decision to turn to clean energy started with a realization I had one day in the shower. I had just come up with a brilliant idea – or so it seemed at the time – for delivering better marketing messages over the internet. And I thought to myself, “Is this what you’re using your god-given gifts for? To sell more crap to people who don’t need it?” I longed for something more meaningful to do with my life.

Then a friend, Martin Roscheisen, asked if I’d take a look at a new solar company he was working on. I knew nothing about solar or energy or electric markets. But I believed Martin had good instincts, so I took a deep dive into it all. Wow. Here was a real market worth over $3B in 2002 and growing at about 40% a year. It wasn’t just hippies on a commune wanting to be off the grid.

I looked more broadly at the energy marketplace and what was happening with new technologies like nano, materials, biotech, semiconductors, internet, and computer hardware and developed a thesis: these innovations built by other industries would be applied to the growing energy problem. It was going to happen more slowly than the internet, but its impact would be even larger. I was hooked. Here was an opportunity to influence the course of the planet’s future and leverage my talents and networks to do it. How could I not grab it?

It also felt like the revolutionary zeal that I and other entrepreneurs had for the internet in the early days. And when we were asked, “are you in this to make money or change the world?” Of course we wanted to change the world! Making money was just validation that it worked. Virtually every early internet entrepreneur I knew recognized the opportunity to change the world for the better by growing the Net. It wasn’t until many years later that the hordes of profit-only entrepreneurs came to the scene. Indeed, if you want a sign of over-investment in cleantech, look for an invasion of founders and CEOs who are in it only for the money.

So I’m in cleantech for the value and my values. I expect to create tremendous economic value. But I wouldn’t be here in the first place if it weren’t for my values.